for delivery either to the business budgets the PayPal opportunity because they lack that fund them or to senior management. the ability to innovate. They missed it largest acquirer in the US. When you IT development bogs down in meetings because they have not adapted to the look also at Alibaba and Amazon that which themselves become forums for strategic realities of digitalisation and are emerging as dominant platforms for blame apportionment and conflict. are still fighting irrelevant, tactical bat- commerce, it will put banks at a signifi- tles, both internally and externally. cant disadvantage,” says King. The banks, who admit this in private, Without a wholesale rethink of IT staff- believe that one solution is to joint ven- ing, reporting lines, incentivisation and These are all valid points, but the core ture with the very FinTechs they also see overall management, banks will con- truth is more problematic. Banks are as a threat. PwC’s survey mentioned ear- tinue to fail at even the most elementary struggling with digital transformation lier reported that 82 percent of respond- initiatives. That isn’t to say there are no because they are failing at the basic hur- ents said partnerships with tech-savvy innovative banks out there. Citi, Bar- dle of ‘change’. Banks’ tech teams are firms would increase over the next three clays, Santander, BBVA, Nordea, DBS scattered and staffed largely by long- to five years. As Gregory Vincent, Head and other global and regional institu- term contractors who are hard to man- of FX Payments at INTL FCStone adds, tions are investing heavily in innovation age to finite objectives and who have no “Banks need to provide innovation, and labs or equivalents and partnering with real loyalty to the institution. They are therefore are looking at what FinTech outside firms to create new solutions for then overlaid by teams from the Big Four are doing and layer it in or buy it. There clients. But for many banks, innovation is consultants, sometimes hundreds of peo- is no point in them building it.” simply a step too far. ple at a time, some of whom work full- time for years within an institution. Citi also believes that banks, “can’t cre- These consulting teams are, for example, ate and build everything. Absolutely we Five second summary drafted in to change application develop- have a number of mechanisms to bring ment culture, but as the existing teams the outside in,” says Morgan McKenney, FinTechs, tech titans like Apple, Paypal, are essentially the client, the consultants head of Citi’s Asia Innovation Lab. “We and Google; and companies that sit on have no real power to effect change are so genuinely interconnected and to data like insurance and energy are threats unless senior management steps in. And have true innovation you will have to col- to the future of traditional banking. But it they do not. laborate externally.” is bank management’s failure to respond appropriately to these threats that will Where there are dedicated teams for Given the scale of banks’ IT spend and cause them the most trouble. digital transformation, inexperienced infrastructure, this could be viewed as an executives again lack true accountability admission of failure. Banks did not miss AI: TRICK OR TREAT FOR TREASURY? Remember the 2015 Sci-Fi movie Ex “We are at least a decade from a power America Merrill Lynch uses AI for smart Machina? A programmer at an internet source that would let them live on.” invoicing matching that is up to 50% search giant wins a competition to spend more accurate than manual matching. the week with a reclusive CEO and his Well that’s good news. But is AI still a AI experiment called Ava. The AI proves threat to treasurers and their jobs (and Banks across the world are trialling or to be more deceptive and intelligent than indeed to other managers)? Researchers have processes using AI. In other words, her creator imagines. The chilling end like Rutherford, who of course will according to the optimists, AI initially is (spoiler alert), where Ava murders the remained employed for some time to being used to automate mundane pro- boss, traps the programmer and escapes develop it, see AI as an opportunity. “AI cesses, allowing full-time employees to to freedom is a warning on the ethics and has been involved in various industries for utilise their talents in more efficient and morality of pursuing AI. years, including finance. Algorithms have creative ways. been used to make calculations that are Recent statements from Elon Musk, the beyond the complexity of regular humans Sceptics remain, well, sceptical. They Tesla creator and entrepreneur claiming as well as to take decisions. What is differ- take the view that companies invest in that AI is the greatest danger to human ent about now is that we are having more these products to save money and their kind, do nothing to quell this Holly- conversation about it and our access to biggest cost is staff. AI is simply another wood-induced fear. Ironically, given machine learning is improving and we form of automation and so while it may Musk’s primary business, AI experts will have better ability to make predic- or may not affect overall employment point out that one big issue for any robots tions using complex data sets.” levels in an economy (and the smart bent on world domination is one that money right now is that it will not create dogs non-intelligent devices now: Most banks are invested in, partnering the new jobs generated by previous with or innovating with AI to see how to industrial innovations), it will most cer- “The joke about the film is that 10 min- improve customer service and solutions. tainly result in the loss of particular job utes after it ends, Ava would have run out Banco Bradesco uses a clever bot for cus- types and most treasury functions are of battery which wouldn’t have made tomer services (trained by the bank’s automatable. Indeed, treasurers’ core job such a great ending,” says Adam Ruther- most valued customer service people). at the moment seems precisely to auto- ford a geneticist and consultant on popu- Based on IBM’s Watson, the age of the mate themselves out of a role. lar science fictions movies such as Ex AI went from five years old to 18 years Machina, Life and World War Z. overnight, according to IBM. Bank of 8 // TREASURY PERSPECTIVES 2017/2018 www.eurofinance.com